Oracle's Questionable Buys

Acquiring software companies rather than building product has been a long tradition for companies that don't do the required R&D along the way. They wake up when something changes and scramble to find something to fill the hole they discovered. At some point, however, if you aren't building anything significant, all you're doing is filling holes and operating a holding company.

I heard during my travels last week that Oracle had bought or at least announced its intention to buy configuration, price, and quote software company Big Machines. Just a few days earlier, it had bought content marketing startup Compendium.

This can't be good news -- and not for the reasons you think. I heard Big Machines only commanded US$400 million, which is a steal for a company accustomed to spending billions. I am not sure what it paid for Compendium. Good for Big Machines. It needed a liquidity event because it's gotten sizable, and the founders and investors deserved to cash out -- so that part made sense.

But what about Oracle?

Where's the Building?

I spent OpenWorld listening to Oracle's ideas and plans for future products -- both hardware and software -- as well as its ideas about how it planned to take over the cloud. It sounded like a company engaged in making products, but I don't know now.

I could understand Oracle buying a few companies and linking them together under the its umbrella to provide a stable base to build on, but that already happened, and I think CPQ is going a bit far.

I don't want to disparage Big Machines or any of the other players in the space. It's just that... doesn't Oracle build anything anymore? When was the last time it launched an innovative new software product that took off?

I know it's got cloud stuff and Fusion, but what has it built that isn't an accounting package? It takes a different skill set to conceive a new application or suite for a new business class, and Oracle doesn't appear to be in that game right now.

I suppose the good news is that the products it buys are already integrated with the broader cloud ecosystem so there's less chance companies will spit them out once they know they're in bed with Oracle. For some reason, companies like to resist Oracle's vision of a single software supplier almost as much as the company likes to promote it. That's not a great strategy in my book.

Microsoft's Approach

I also spent an intensive day last week with Microsoft listening to its executives talk about the many things the company is building and the importance of a continuous user experience across devices, as well as deep process integration between front and back office and all places in between.

Microsoft has bought companies too, and two of its more recent packages -- Netbreeze and Marketing Pilot -- were on display and fully integrated into the Dynamics family, which made an appealing demo.

I should also mention that last week I was at the Eloqua Experience, a user meeting. Eloqua was bought by Oracle in the recent past, and Eloqua's marketing technology and thought leadership were very impressive. However, it was Eloqua as a standalone on display, and not so much marketing integrated into the larger product suite.

Maybe that simply reflects the vendors' strategies. Microsoft is trying to provide software integrated up and down the stack, while Oracle more or less says the same thing but respects a more heterogeneous market. It focuses on the lower end of the stack, the things that have commoditized or are in the process of doing so -- think hardware, operating systems, databases and middleware.

Filling Holes

At that, Oracle looks increasingly like a throwback, a hardware company with a bit of software to make it all relevant, except that now the bit of software has to be a mountain. Why fret about where the stuff comes from, though? Parts is parts, right?

Well, maybe and maybe not. At some point we reach saturation, the point where adding another package won't make as much sense as having a strategy that really links things, not just as applications but as key components of processes. Doing that will mean more than treating software like Lego.

Acquiring software companies rather than building product has been a long tradition for companies that don't do the required R&D along the way. They wake up when something changes and scramble to find something to fill the hole they discovered.

At some point, however, if you aren't building anything significant, all you're doing is filling holes and operating a holding company. When that happens, you have forfeited your technology leadership and all that's left is finance, collecting the money.

Building software, and not just integrations, is an art leveraging both the business and technology, and the point is getting to 1 + 1 = 3. Sometimes I wonder if Oracle can still do that.